26 January 2012 - Par jaumont - Tags : Editorial

2012: Tax, cap, flack!


Creativity and growth look they’re in for a rough ride in the year ahead.

Obviously, it’s unthinkable to start 2012 by trying to use the same methods that spawned the 2008 crisis. It’s essential to find appropriate solutions and measures to deal with what’s been happening for the last few years. However, nothing really efficient can be implemented blindly, using targeted animosity and fear of the future as the main guidelines.

In general, the things I read or heard about in 2011 to deal with the crisis left a bitter taste and a strange feeling that we were treading water or worse, starting to sink deeper into the quagmire.

There’s no doubt that the crisis we have had to face since 2008 is unprecedented in its global dimension, but it’s not in being “narrow-minded” or “uptight” that we’ll get over the many hurdles ahead.

I am convinced that, directly or indirectly, we all have our share of responsibility for the current state of affairs. We all expected and believed in returns on supposedly risk-free investments and we all thought that the financial sector would be the new Eldorado, like the dotcoms of previous years, and that it would spur on infinite global growth. The same errors in judgment, the same analysis, the same madness… Since on the surface, these two phenomena are not quite the same, the comparison may not be obvious, but ultimately the same lines of thinking lead to the same hazards.  

In this context, it’s hard to blame the media and politicians for their reactions, in criticizing an industry that has shown itself incapable of reforming or regulating itself and to present a politically acceptable image of itself.

The complex paradox of our politicians is to walk the fine line between being politically intelligent and economically foolish!
In this light, it’s important to remember that the financial industry is above all an industry. While some countries are willing to subsidize the repatriation of offshore industrial activities, they treat the financial industry as a case apart.  It’s important to stress that the financial industry creates real employment and that it contributes to the wealth and health of our societies. So, let’s not fall into the trap of pushing financial companies irremediably offshore. Nevertheless, this does not mean that the financial industry, like all other industries, should be allowed to regulate itself without limitations, as has been the case in the recent past in our democracies.


Measures such as the Financial Transaction Tax (FTT) or added levies on financial incomes or High-Frequency Trading are treated in the media tendentiously and we are often on the borderline of disinformation. Clearly, the financial industry is seriously misunderstood and attacks are often way off the mark. Just a few examples to illustrate this point: it is widely recognized that paying employees in part on equity-based profit-sharing schemes (shares and stock options) is a good idea since it provides long-term income based on shared success. Why then tax these forms of compensation more than traditional salaries and why attack them in the media, making them totally unacceptable and impossible to use? The FTT is another example. All serious studies have shown that this tax will not work, simply because it is impossible to apply worldwide, while financial transactions are global. It makes more sense to tax post-profits, which is already the case for financial incomes and, in France, through recently-adopted levies on financial companies. In any case, it would be best to ensure that companies in all sectors actually pay the taxes they should, which doesn’t seem to be the case right now.

It’s difficult to criticize politicians for trying to propose short-term solutions and to constantly speak out on these sensitive subjects since, after all, almost all our democracies function with the constant pressure of short electoral mandates, driving politicians to campaign on an almost permanent basis.  

I therefore hope (naively perhaps) that 2012 will bring us a renewed sense of dialogue and empathy. I also hope that the upcoming presidential elections in France will not generate demagogical competition, but that they will lead to greater unity between European democracies in their shared governance principles to establish a stable base to build a solid future, independent of electoral opportunism and detached from the fear and anger generated by the current crisis.

Happy New Year to all.

Dominique Ceolin, CEO of ABC arbitrage group.

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